Thursday, December 13, 2007

Giuliani and the Corporate-Security Racket

After visiting the oracle bones, I wrote last week that Rudolph Giuliani would not be the Republican presidential candidate. He is just too damned weird for Dubuque. Guiliani continues to poll first or second in Iowa, but his statistical advantage over Romney and Huckabee has totally collapsed. The fact that he still beats them in polls by a couple points can hardly be comforting to the candidate and his staff considering the lead he has lost in the last several months.

At the end of the last article, I said I would be writing about the bizarre corporate-security empire Giuliani created after he left the mayor’s office. I haven’t quite gotten around to that because I’ve been busy trying to finish up my classes. While I was snoozing or studying, Time reporters Michael Weisskopf and Massimo Calabresi were hard at work on an article that makes my point about Giuliani’s businesses.

Giuliani’s firm, Giuliani Partners, whose clients remain a mystery almost a year after its chief executive decided he wanted to be president, has been paid $30 million to lobby on behalf of a company that makes software that tracks individuals based on public records. The company – Florida-based Seisint – wanted to sell its spy software to governments, and thought no one could make a better case for its obscure product than America’s Mayor.

The Seisint deal, details of which TIME pieced together from interviews and corporate documents, seemed like a good match for Giuliani's company. Seisint's founder, Hank Asher, was regarded as a database wizard who used supercomputers to store billions of pieces of information from public records, which, he claimed, were able to spit out the names of some of the 9/11 hijackers before they were publicly identified. The firm's potential seemed endless to GP, and it signed on for what Seisint saw as a heavily discounted fee of $2 million a year, plus a percentage of revenue from company sales to government and corporate buyers.

In the first year, GP earned $6.5 million, Seisint records show, in part for what Brauser and Seisint's in-house lobbyist, Dan Latham, say were commissions for state and federal contracts. Giuliani "came through," says Brauser. "The doors were wide open. It was almost a flood of business opportunities." Latham says GP set up meetings in 2003 at the Department of Homeland Security at which Seisint executives pushed a data-mining program called the Multistate Anti-Terrorism Information Exchange, or MATRIX. The program looked like a promising law-enforcement tool that states could use in partnership with Seisint. The Federal Government spent $12 million to run the program, and eventually 13 states signed up to participate in it.

The article makes a specific legal complaint about the arrangement – that it is illegal under federal law to accept commissions to “solicit or secure” government contracts. Certainly this makes sense, but pause for a moment. This is not a regular government contract – we’re not talking about who gets to sell bottled water to the Department of Homeland Security. Giuliani accepted these payments with the understanding that he could get the federals and state governments to buy this privately-manufactured domestic spying technology. And he succeeded before anyone asked relevant questions, such as: What does Rudy Giuliani know about this stuff? Should a single, private corporation be able to develop and sell technology for domestic spying? Does that not place too much power in the hands of that corporation?

Meanwhile, Seisint's premier product — MATRIX — had proved controversial. The databases it searched contained personal histories of millions of Americans, their relatives, past addresses, property records and credit ratings. Civil-liberties groups said MATRIX would create detailed data profiles of innocent Americans. Georgia and Utah, which had signed up for MATRIX, launched investigations into the privacy concerns raised by the program's vast data files.

…

But however promising MATRIX's future appeared, it was unable to escape the concerns of privacy watchdogs. In early 2004, a commission appointed by Utah's Governor recommended dropping MATRIX over privacy concerns. One commission member, Elizabeth Dunning, said the program's accumulation of personal data on innocent Americans was "shocking" and "outrageous." Shortly thereafter, however, Seisint was sold to the British-Dutch firm Reed Elsevier. The sale netted GP $24 million, records show, with half of that made possible by the lower stock-option price. "A lot of people made a lot of money on the sale of Seisint," said Latham. "[Giuliani] was one of them." Did law enforcement benefit too? Hard to say. By mid-2004, fewer than half the states that had originally signed up for MATRIX remained in the program, and by the end of the year the rest had quit. Less than two years after Giuliani signed on to market MATRIX, the program was dead.

This is the essential problem I was trying to describe with Giuliani’s business. Not only is his firm making hundreds of millions of dollars on corporate security, but it is not even engaging the most basic ethical and legal problems of the business. Giuliani convinced several government entities to spend millions on spying technology that was offensive to the expectation of privacy that is at the root of our laws. To say the firm didn’t care is an understatement. It was engaged in a pure racket – use the fear of terrorism and Giuliani’s ridiculous cache as the dean of guys who pretend to know a lot about terrorism to make some big bucks off uninformed and scared governments and businesses. That what they were selling was pure junk didn’t really matter – what mattered was that Giuliani got to clean up off his unique political moment. So his firm is the big winner – and you’re the loser. Not only was he promoting technology that would have collected all available public data on you, but he sold it to the government, which bought it with tax money collected from you and your neighbors. I certainly hope Rudy and Judi toast the good citizens the next time they are in the Hamptons.